Plain-English definitions, reviewed by an independent investor
Operating Margin
Operating margin is the share of revenue left after running costs but before interest and tax.
Operating margin is the share of revenue left after running costs but before interest and tax.
Operating Margin = Operating Income ÷ Revenue × 100%
Why it matters
It shows pricing power and cost control before financing distort the picture.
Common confusion
Compare within an industry; a thin-margin grocery is fine, a thin-margin software firm is not.
Frequently Asked Questions
What is a good operating margin?
Software often tops 30%; retail may be single digits. Context is everything.
Operating vs net margin?
Operating excludes interest and tax; net is what is left at the very bottom.